Air travel map is being redrawn as Global economy evolves

The global air travel map is being redrawn as growth rates slow in traditional markets and surge in evolving economies including India, Africa and Latin America, the President and Chief Executive Officer of Etihad Airways, Mr James Hogan, said today.

His comments coincided with
the announcement by Etihad Airways of a 24 per cent strategic equity investment
in Jet Airways, the second largest airline in India.

In Amsterdam, delivering
the fifth annual Airneth Lecture to aviation industry executives, policymakers
and researchers, Mr Hogan said the major shift occurring in the global economy
was impacting significantly upon the air transport industry, requiring airlines
to reshape their networks and enter new partnerships in order to remain
competitive.

“Legacy markets are
growing, but at a slower pace. Emerging markets are surging,” Mr Hogan said.
“Traffic patterns and demographics are changing. Traditional air transport hubs
are declining in prominence, with growth constrained by inadequate
infrastructure and ingrained political resistance to change.

“The Arabian Gulf – the
geographic centre of the world – is now evolving as the global centre of the
air transport industry, with the number of passengers passing through Gulf hubs
outstripping industry growth rates.”

IATA figures shows that in
February, 2013, Middle East hub traffic was up by 10.6 per cent over February,
2012, compared with the global growth rate of 3.7 per cent.

Mr Hogan said the airline
industry was entering a new phase of consolidation, as no single carrier could
satisfy the global growth in passenger traffic. He said a new hybrid business
model was emerging, in which minority equity alliances were bridging the gap
between full mergers and legacy alliances.

In addition to its new
investment in Jet Airways, Etihad Airways has acquired stakes in airberlin
(just under 30 per cent), Air Seychelles (40 per cent), Virgin Australia (8.56
per cent) and Aer Lingus (just under 3 per cent), and continues to explore
opportunities where they make financial and strategic sense.

“The new business model
delivers benefits which previously were available only through full mergers or
acquisitions,” Mr Hogan said.

These benefits include
joint procurement, cross-utilisation of aircraft, joint training of pilots and
cabin crew, shared sales forces in common destinations, and dual focus on
revenue growth and cost reduction.

But Mr Hogan said the
airline industry’s growth would be held back by government under-investment in
efficient airspace management, and continued application of operating and
investment restrictions designed decades ago.

Mr Hogan said the markets
which would benefit most from the continued growth in air transport would be
those in “aviation-friendly jurisdictions”, in which Governments recognised the
economic contributions of airlines and the technological advances and
capabilities of aircraft.

He said growth also would
be maximised in markets like Abu Dhabi where governments embraced and
implemented open skies policies, and planned airports, infrastructure, airspace
corridors and operational regulations to support the industry and its
customers.

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